Swedish Krona Slides on Growing Talk of Riksbank Interventionby
Central bank's warnings not an `empty threat': Danske
Level of about 9 to 9.1 per euro seen triggering action
Sweden’s krona is on track for its longest run of declines versus the euro since August on speculation the nation’s central bank is on the verge of intervening to pull its currency back from near a 10-month high.
The krona has weakened against the shared European currency for the past four trading days, and dropped the most in almost a month on Tuesday. It’s still up 4 percent versus its peer since mid-August.
The Riksbank warned at the end of last year that it’s ready to intervene by buying foreign currency if the strong krona threatens its ambitions to boost inflation. Officials followed that up with a statement Monday saying that the bank’s executive board had put in place the mechanisms allowing it to act “instantly.”
Swedbank AB said the central bank is “very near” to taking steps to weaken the krona, while Danske Bank A/S said intervention is a “done deal” if the currency appreciates further. Hedge funds may be gearing up to bet against the Riksbank’s efforts to stem the currency’s gains, according to SEB AB.
“It’s not likely that verbal intervention and the statement the other day were just empty threats,” said Stefan Mellin, a senior analyst at Danske in Stockholm. “The Riksbank will do it if they don’t get the krona where they want it. If we get euro-krona below 9.1 or toward 9 they will intervene.”
The krona weakened 0.5 percent to 9.2478 per euro as of 4 p.m. in London, the biggest decline since Dec. 10 and down from 9.1220 on Dec. 30. It dropped against all of its 16 major peers and plunged 1.5 percent to 8.6221 per dollar.
Swedish markets are closing early Tuesday and are shut Wednesday for a public holiday.